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When Banks Get Funding For Property Development Wrong


Site Acquisition Funding

We recently had a client give us a call saying they may need us on standby to settle a site acquisition for a property development within a weeks’ time. The client was not confident his bank would be able to settle on time, despite the bank working on the file for the past 3 months.

Urgent Lending

Because of the private lending services we offer and the family office funds that work with us, we are often able to facilitate such transactions on short notice!

Settlement Risk and Bank Funding

Long story short the client opted to stay with the bank, after the bank kept promising the deal would be done on time. The bank ended up failing to settle on time, consequently costing the client $40,000 in late settlement fees. In addition to 3 months of anxiety and stress as to whether the deal would be funded or not.

Unfortunately due to bureaucracy of banks, settlement risk is very real.

Private Lending & Urgent Funding

At the end of it the client said, “I should of stuck with you guys, the extra money I paid in penalties would of covered the higher rate, and I wouldn’t have had to stress for 3 months.”

No Doc Loans / No Credit Check Loans

At the time the delta between the bank rate and the rate we could of provided the property developer / builder with was 2.3%. Whilst the rates of private lenders are higher, purist private lenders don’t have to typically answer to a credit committee with all the credit /serviceability / credit score requirements that banks do. Consequently, they are able to provide urgent funds as needed.

What this means is financials are seldom asked for!

Private Funding Certainty

At the time the bulk of the extra costs of using a private lender would have been covered by the penalties that client had paid for late settlement. Above all they would of have had certainty and peace of mind about their private funding situation, for their property development.

Funding for Property developers and builders

The reality is that with bank funding, there is a high degree of ambiguity, uncertainty and stress. Especially for property developers and builders that are seeking funding for site acquisition and or construction lending.

The banks in a lot of respects have made it harder for builders to get funding, and some have avoided the construction sector all together!

Property development funding certainty

The reality is, and we have done the numbers, having peace of mind for your funding situation allows you to move forward with confidence. For the above deal, settlement and DD could have been achieved within a week, versus the 3 month delay with the bank. If you were to recycle that money 4 times, you would have saved yourself close to 1 year in delays, and have been able to reinvest your property development profits. When you put all of that together, the extra cost of private lending, actually makes it cheaper than bank funding!

There is a cost to time!

There is a cost to loss reinvestment of profits!

Time is Money.

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